German 10-year yields, which fell the most since October last week, reversed a very early gain and were last modestly lower that day at 2.821%. The two-year Schatz interest rate remained stable at 2.1%.
German government bond yields fell in early trading on Monday, in contrast to U.S. government bond yields, which rose after the Trump administration threatened Chairman Jerome Powell with criminal charges, renewing investor jitters about the independence of the world’s most powerful central bank.
A new attack on the Fed will have little or no impact on the way the European Central Bank conducts monetary policy. But the news dealt a blow to investor confidence and heightened concerns about the US’s reliability as an investment destination, funneling more capital into markets like Europe.
“Concerns about the Federal Reserve’s independence have resurfaced amid a growing feud between Trump and the Fed, adding a new layer of uncertainty to the interest rate outlook and risk sentiment,” Charu Chanana, chief investment strategist at Saxo Bank, said in a note.
Meanwhile, yields on 10-year U.S. Treasury bonds rose 1.4 basis points to 4.185%, while those on 30-year bonds, which typically reflect investor sentiment toward long-term government finances, rose 3.2 basis points to 4.851%.
Last week’s data painted a picture of a U.S. economy continuing to generate jobs with moderating inflation, meaning there could be little room for the aggressive rate cuts President Donald Trump wants from the Fed. Currently, market participants are not expecting any cuts until June, a view that did not change from Sunday’s developments. Within the eurozone, Italian and French 10-year yields each rose by almost 2 basis points to 3.477% and 3.544% respectively.
More bond issuance is expected this week from Germany, Austria and Italy.
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